Cache Raises $12.5 Million

Cache, a Canadian-based firm that allows investors to swap large equity positions for diversified portfolios, announced that it raised $12.5 million in a round lead by long-time investor First Round Capital with participation from existing investor Quiet Capital.

Cache allows investors with a large stock concentration (and low cost basis) exchange their holding for a more diversified index tax-deferred. They currently offer the NASDAQ 100 and the S&P 500 but part of the proceeds will be used to launch additional funds. Basically, you exchange your concentrated holding for shares in a fund that also contains everyone else's concentrated holdings. Your cost basis transfers to the shares you receive, if done correctly, and the capital gains are deferred. They then us some sort of magic (probably derivatives) to benchmark everything to the appropriate index. And voila, your concentrated stock position is now a more diversified index.

This sort of maneuver has been traditionally reserved for private banking clients at large firms, but the Cache technology has allowed them to move downstream to minimums as low as $100,000. It seems to be working. They have grown to over $625mm in AUM over the last year or so. Tesla seems to be the most popular stock holding to exchange, which is not surprising.

This is an excellent example of the Family Office as-a-Service thesis, where WealthTech firms take some of the high-touch/low-scale services normally found at a family office and scales them down the net worth chain with smart technology. For more information on that, read our theme piece WealthTech Themes for the Next 5 Years.